The Second Circuit effectively held that denied summary-judgment motions are insufficient to preserve issues—even purely legal issues—for appeal.
January 12, 2021
As a general rule, parties cannot appeal an order denying summary judgment after a case proceeds to a full trial. In such a case, the trial record supersedes the summary-judgment record. So any questions about the sufficiency of the evidence at summary judgment become more or less moot; what matters is the sufficiency of the trial evidence. And litigants must raise challenges to the sufficiency of the trial evidence via motions under Federal Rule of Civil Procedure 50. The issue might be better characterized as whether summary-judgment denials preserve issues for appeal; the appellant is challenging the judgment for reasons specified in the summary-judgment motion. The point is that a denied summary-judgment motion does not preserve challenges to the sufficiency of the evidence at trial.
A potential exception to this rule might exist when a summary-judgment motion raises a purely legal issue. That is, the denied summary-judgment motion might be enough to preserve that purely legal issue. In last week’s Omega SA v. 375 Canal, LLC, a panel of the Second Circuit split on this matter. The majority held that a denied motion for summary judgment was not sufficient to preserve a challenge to the applicable legal standard. A partial dissent from Judge Lohier argued to the contrary.
The issue was ultimately irrelevant; the appellant had preserved the same issue by objecting to the jury instructions. But the holding could be important for future litigants who don’t otherwise preserve for appeal issues that they raised in a denied summary-judgment motion.
The Omega Litigation & the Dispute Over Contributory Trademark Infringement
Simplifying a bit, Omega involved claims against a corporate landlord for contributory trademark infringement. The defendant owned property in Manhattan. Some of the landlord’s tenants used that property to sell counterfeit Omega watches. After New York authorities shut down this operation, Omega sued the landlord. Omega did not allege, however, that the landlord itself had sold counterfeit goods. It instead alleged that the landlord had leased the property “despite knowing that vendors at the property were selling counterfeit Omega goods.”
A central dispute in the case concerned the legal standard for Omega’s contributory trademark-infringement claims. When the landlord sought summary judgment, it argued that Omega’s claims failed because Omega could not identify any particular tenant to whom the landlord had rented the property despite knowing (or having reason to know) that the tenant was selling counterfeit watches. Omega responded that it did not need to identify any particular tenant. Its claims turned on the landlord’s willful blindness—that is, the landlord “could not avoid liability by shielding itself from learning the identities of the vendors who were selling counterfeits.”
The district court sided with Omega on this issue and denied summary judgment. The case then proceeded to trial, and a jury returned a verdict for Omega. The landlord appealed. And in that appeal, the landlord sought review of the district court’s denial of summary judgment.
Summary-Judgment Denials & Preserving Pure Legal Issues
A majority of the Second Circuit ultimately held that the landlord could not appeal the summary-judgment denial. In Ortiz v. Jordan, the Supreme Court held that parties cannot appeal the denial of summary after a full trial on the merits. A summary-judgment motion can challenge the sufficiency of the evidence. But once a case proceeds to trial, the evidence presented at trial supersedes the summary-judgment record. A party may still challenge the sufficiency of the evidence at trial. But summary judgment is not the way to do so; the party must seek judgment as a matter of law under Rule 50. And Rule 50 motions preserve the evidence-sufficiency issue for appeal.
Ortiz did not address whether the same rule applied to purely legal issues, rather than evidence-sufficiency issues. And the majority noted the possibility of an exception to Ortiz for purely legal issues. But the majority’s description of that potential exception more or less rendered it useless. The court said that even in cases of purely legal issues, the appellant must still obtain a certified appeal via 28 U.S.C. § 1292(b) or raise the issue at trial via Rule 50. So it’s not the summary-judgment motion that preserves the legal issue; its the certified appeal or the Rule 50 motion that does so.
The issue on appeal—whether the landlord could be liable under willful-blindness theory—was nevertheless preserved via the landlord’s objection to the jury instructions. And on that issue, the Second Circuit affirmed.
Judge Lohier’s Partial Dissent
Judge Lohier concurred in part and dissented in part. According to Judge Lohier, the general rule against appealing summary-judgment denials applies to evidence-sufficiency issues. But a summary-judgment motion that raises a pure legal issue is sufficient to preserve that issue for appeal. And the landlord’s summary-judgment motion in Omega raised a pure issue of law: the legal standard for contributory trademark infringement.
Other issues
The Omega opinions raises a few additional issues, including potential inconsistencies and conflicts in the Second Circuit’s caselaw on this matter and some discussion of attempting to immediately appeal from a summary-judgment denial. It’s well worth reading in full.
Omega SA v. 375 Canal, LLC, 2021 WL 42112 (2d Cir. Jan. 6, 2021), available at CourtListener and Westlaw.